Category: Real Estate

Escrow 101 for Maui Home Buyers

Maui escrow
When you buy a house in Maui, you basically have to learn a whole new language. Between figuring things out with your mortgage lender and navigating the results of the home inspection, you’re probably googling words left and right. It’s important to protect yourself during this major transaction. And that’s why one of the words you might have to look up — escrow — is key.

What is escrow? You’ve probably heard of people getting stuck in escrow, so you might feel less than excited about the topic. But fear not! Escrow is actually super easy to understand and great for both the buyer and the seller.

What is escrow?

Let’s say Johnny wants to buy an apple from Susie. But Johnny and Susie don’t really know each other and want to make sure they both get what they expect from the deal. So they pick an impartial person off the playground. Let’s call him Timmy.

Now, to make sure everything goes down the way it should, Susie hands her apple to Timmy. Johnny gives Timmy his money. And then, and only then, Timmy gives Susie the money and Johnny the apple. In this case, Timmy is escrow. Escrow is an arrangement where you use an impartial third party to protect yourself during a transaction.

Now let’s apply it to real estate. The stakes are a little bit higher than apples, so it makes sense to take some precautions. In a real estate transaction, escrow is where the money the buyer plans to pay the seller is held until all the specifications of the deal can be worked out and the deed can be transferred.

There are escrow companies who are experts at keeping money safe and disbursing it at the exact right moment. There are even escrow officers who will help with the entire process. So escrow, while it might get a bad rap because people get tied up in it, is actually a very helpful part of the real estate process.

Escrow and earnest money

If you’re a home buyer in Maui, you’re probably taking the process seriously. This is where you’re going to live the next season of your life, after all! You’ve spent the time to vet the new house and you’re pretty serious about buying it. Some might even say you’re earnest. So you offer the seller a little bit of money called earnest money to show them you’re serious about buying their home.

But here’s the thing. You don’t really know this seller. Sure, they might seem nice. And, yes, you like their home. But they could be shady. It’s not a judgment. You simply don’t have a way to get to know them well enough to feel good writing them a check for thousands of dollars when they’re not giving you anything in return — yet.

So you don’t make your earnest money out to the seller directly. Instead, you put it into escrow. And it lives safely there until it’s either applied to the purchase price of the home at closing or returned to you if the deal falls through for a number of reasons.

Escrow and closing

You’ve worked out all the kinks in your transaction. Everyone’s happy with the inspection. Everyone’s agreed on a move out date. You’re ready to get this thing finished so you can either move into your new home or get a check from your buyers. And this is where escrow really shines.

We’re talking about a lot of money here. Houses aren’t cheap! Using escrow protects everyone involved while this large sum of money changes hands. Before closing, the buyer will put the purchase price amount into escrow. It will sit safely there while the final paperwork is completed and the deed is recorded. Then, and only then, will the escrow company pay that amount to the seller.

You hear about people getting tied up in escrow because closing isn’t always smooth sailing. Last minute issues arise and these can be frustrating for all parties involved. But, even then, you’ll be glad you’ve arranged escrow. Why? Escrow protects the buyer because it ensures the seller doesn’t run off with their money, house deed still in hand. At the same time, it protects the seller from handing over their deed in exchange for a check that won’t clear.

Tips For Knowing When to Upsize or Downsize

Maui real estate
Are you considering moving to a new Maui home? Perhaps you think a change will make everyone happier, and help you keep up with the cost and upkeep of homeownership.

Right-sizing is a common term used to describe the process of choosing a home to fit your current needs. Here are four ways to tell that it’s time to make the switch and look into purchasing a home that’s better suited to your current situation.

Too Much to Clean

No one wants to spend a ton of free time scrubbing, sweeping, mopping and caring for a home. Consider how and where you’re comfortable at home. Many people spend most of their time in a few key spaces like the bedroom and kitchen. If you’re spending more time cleaning than living, you either don’t have enough people cleaning—or you have too much space for the amount of living you do.

Too Much or Not Enough lawn

The yard is one part of a property that many people don’t have time to care for consistently. Other people love spending an hour or so in the garden each day or sipping a cup of coffee while the sun is coming up. Finding the right space to let you entertain, relax after a hard day, or give the kids room to safely burn off some energy is important. Considering low-maintenance options and how often the family uses the outdoor space can help you decide if now is the time to buy a different Maui home.

Not Enough Room

When you have several young children, space is always an issue. When the kids grow up, things change—including the size of the home needed. Sellers can help prospective buyers find a property that’s perfect for their current needs. Whether you’re adding members, or the family dynamic is shifting so there are fewer people in the home, the size of the house is a big deal.

Kitchen Space

No one likes crowding into a tight space for dinners or special occasions like birthday parties and graduation celebrations. It’s also tough to sit in a huge kitchen by yourself thinking about how much cleaning is necessary or the additional cost to remodel a huge space when there are only two or three people in the home. Right-sizing can help you discover the best property for your household after big changes like an elderly parent moving in, the kids going off to college, or several grandchildren coming along.

Thinking about recent life changes can help homeowners decide when it’s time to make a move. Keeping your finances, life plans and schedule on track isn’t always easy when you’re living in a home that’s too small or big for your present needs. As families evolve, mortgage fees, maintenance costs and time to care for the property become even more important.

Explaining Real Estate Commission

Maui real estate
If you hire a real estate agent to help you buy, sell, or rent a house in Maui, this professional gets paid through a real estate commission. So how much do you pay, and what for? Is there any wiggle room to negotiate this fee?

How much is a real estate commission?

Rather than getting paid hourly or weekly fees, most real estate agents earn money only when a real estate deal goes through.

While there are some real estate agents in Maui who will charge a flat fee for their services, most charge a percentage of the sales price of the home once the deal is done. That exact percentage varies, but the commission is typically 5% to 6% of a home’s final sales price. On a $200,000 home, a 6% commission would amount to $12,000.

Granted, this may seem like a serious chunk of change, but keep in mind that no one makes off with the whole amount! Plus, real estate agents don’t see a dime until a buyer finds a home she loves, the seller accepts the offer, and all parties meet at the closing table. That process can mean weeks or months of work.

Who pays the commission?

Generally, the home seller pays the full commission for the services of both their own listing agent and the buyer’s agent.

Buyer’s and seller’s agents typically split the commission. So if a home sells for $200,000 at a 6% commission, the seller’s agent and buyer’s agent might split that $12,000, and each receive $6,000.

However, the commission split varies from one agent to another, with new agents sometimes earning a smaller percentage of the commission than experienced agents who sell more homes or more expensive properties.

What is dual agency?

So what happens if an agent represents the buyer and the seller? In that case, the agent becomes a “dual agent” and gets paid both commissions.

However, because it puts them in a sticky position of having to work for both the seller and the buyer, many agents don’t practice dual agency.

What does a real estate agent commission cover?

Though people certainly have the option of selling (or buying) their house without a real estate agent, agents provide clients a wide range of services, including helping you price your home, marketing it (on the multiple listing service, social media, and other venues), negotiating with home buyers, and ushering the home sale through closing.

As trained experts, real estate agents can help you fetch top dollar for your Maui house and put out fires—while also alleviating some of the stress that comes with selling a home.

Want proof? Just look at the numbers: A recent survey found that the typical “for sale by owner” home sold for $190,000, compared with $249,000 for agent-assisted home sales, according to the National Association of Realtors®. That’s in line with a recent survey from Keeping Current Matters that found that homes listed for sale with a real estate agent sell for $46,000 more on average than FSBO houses. Perhaps that explains why 92% of home sellers use an agent to sell their house.

Is a real estate agent commission negotiable?

Though 5% to 6% tends to be the norm, commission standards can vary from state to state and among brokerages. Still, there are no federal or state laws that set commission rates—meaning commission is negotiable.

In other words, if you’re a home seller, you can certainly ask your agent to reduce their commission, but be aware that he is not obligated to do so.

A factor to consider: Because the marketing dollars for a property generally come from the agent’s commission, a lower commission could mean less advertising for your house.

That being said, it doesn’t hurt to ask for a lower commission. Most agents won’t take offense, and the worst case is they say no. Or, if you’re truly tight on cash—say, because you’ve maxed out your budget buying your next home—you could opt for a transactional agreement, in which the listing agent will help you set an asking price, facilitate communication between you and the buyer, write the contract, and move the process along to closing for a flat fee or lower commission, but you won’t receive the agent’s full services. It’s not ideal, but it’s the right route for some people. However, not all agents offer transactional agreements, so you may have to shop around to find one.

Bottom line: It is likely that buying and selling a home will be the biggest financial transactions of your life, so be sure you find an agent that you trust will do a great job. This is not the time to shop solely on price.

Things to Look for When Buying a New House

Maui homes
Shopping for a new house in Maui means doing a little digging to see if any big repairs or deal breakers are lurking beneath the surface. It’s likely a few issues will come up during your inspection, but it’s smart to check these things out before you put in an offer.

Damaged roof

The first thing you need to know about your potential new home is the age and condition of the roof. Do a visual check of the roof by walking around the house. Look for damaged or missing shingles, rusted flashing, moss or dirt and any other spots that worry you. A damaged roof could seriously impact the interior and exterior of your home.

Heating and cooling performance

Few things are worse than needing A/C or heat, and not having it. So make sure you check the heating and cooling system to see if it’s in good working order. Ask the age of the system, turn it on and off, take a look at the ductwork if possible and see if the filters fit snugly. Don’t forget to look outside, too. Listen to how the air conditioning and heating units sound when they’re running. Look for rust and dirt on the equipment.

Water damage

Inside the house, look for water stains on the ceiling. Check under sinks in the kitchen and bathrooms and test all of the faucets and showers. You’ll also want to check out the basement, garage or crawl space to see if there’s a sump pump. These could all indicate past or future problems with poor water drainage which could lead to flooding. Outside, look for sloping areas in the yard, standing water, french drains, water marks on the foundation. Even if the water issues aren’t active anymore, it’s good to know past problems and what could pop up in the future.

Foundation faults

If you’re serious about buying a house, be sure to check out the foundation. Walk around the exterior, go into the crawlspace or basement and look for cracks and other red flags.

Working appliances and electrical outlets

Don’t let cosmetic repairs distract you from potential problems. Look at all appliances to make sure they’re in good shape. Turn on the stove, run the dishwasher and peek into the refrigerator. Look for grounded GFCI outlets in your kitchen and baths — the ones with the red and black reset buttons. Also, give the circuit breaker a look and flip a few of the breakers. If this is going to be your new home, you want to make sure everything works as it should.

Working windows

It’s a simple thing, but check all the windows in the new house to make sure they open properly. This is important for fire safety, as well as for comfort on a warm day.

Bugs and pests

You may not see any critters during the day, but look in corners and cabinets for mouse and roach droppings. Again, this is another easy fix. You can ask the homeowner for a pest control treatment as part of your contract.

The 10 Most Profitable Markets for Vacation Homes

Maui real estate
A house right on the beach, maybe a cabin in the woods surrounded by the magnificent fall foliage, or perhaps a rustic lodge in the mountains near the ski slopes. Whatever your dream vacation home happens to be, what if it turned into your best investment as well?

Not only do many second-home markets have solid returns, some even post profits that rival or surpass those in the nation’s hottest markets. Plus, some of these vacation spots are surprisingly affordable, with plenty of bargains to be had. Realtor.com ranked the most lucrative second-home markets in the nation, the places where sellers are walking away with biggest profits.

To find the country’s most profitable vacation-home markets, they looked at the 500 largest metropolitan areas where second homes made up at least 12% of all of the properties. Then they focused on all of the homes that sold over the past 12 months and compared the most recent sale prices to their previous ones, going back as far as 2008. The profit was defined as the difference between the two sales.

1. Traverse City, MI

Annualized rate of return: 14%
Median home list price: $315,000

2. Claremont, NH

Annualized rate of return: 12%
Median home list price: $255,000

3. Clearlake, CA

Annualized rate of return: 11%
Median home list price: $325,100

4. Brainerd, MN

Annualized rate of return: 11%
Median home list price: $286,200

5. Port St. Lucie, FL

Annualized rate of return: 11%
Median home list price: $279,300

6. Bend, OR

Annualized rate of return: 11%
Median home list price: $442,000

7. Aberdeen, WA

Annualized rate of return: 10%
Median home list price: $229,500

8. Wenatchee, WA

Annualized rate of return: 10%
Median home list price: $449,100

9. Hilo, HI

Annualized rate of return: 10%
Median home list price: $494,100

10. Key West, FL

Annualized rate of return: 9%
Median home list price: $687,100

Questions to Ask During an Open House

Maui real estate
Attending open houses in Maui can be a lot of fun. After all, how often do you get a chance to tour other people’s houses without restriction? However, when you’re serious about buying a home, it’s time to start asking the serious questions.

1. Why are the sellers moving?

Truth be told, you may not get a straight answer on this one, but it’s good to ask anyway. Doing so can give you some insight into the sellers’ motivation, which can be a powerful tool if you decide to make an offer. If, for example, the agent tells you that the sellers are moving for a new job, then you know that they likely have a deadline to meet in their move and may be more flexible on price.

2. How long has the home been on the market?

This is another question that can be helpful in guiding your offer, should you decide to write one up. Time on market is one of the biggest indicators of flexibility on price. Typically, if a home was put up for sale in the last few days, sellers are willing to pass over low-ball offers and wait for something better. If, however, the house has been sitting for a while without interest, they may be more open to negotiating.

3. What school district are we in?

Whether or not you envision kids in your future, you should inquire about the school district. The reality is, even if you don’t have little ones, the school district will still affect you as a homeowner. It impacts what you pay in taxes as well as your ability to sell in the future, since most people want to be positioned near good schools.

4. Are there any offers on the table?

If so, find out how many and when the sellers are planning to make their final decision. It’s important to know what you’re up against; if you’re interested in the home, this dictates when and how you submit your offer. If there are multiple offers on the table, you may have to move more quickly, and you’ll want to put together the strongest offer possible.

5. May I have a Seller’s Property Disclosure?

Whenever a home goes on the market in Maui, the sellers must fill out a Seller’s Property Disclosure to the best of their ability. This document details all of the home’s systems (as well as their ages), any major renovations and any known problems. It’s essentially your guide to the condition of the home.

How to Get the Best Home Price When Buying New Construction

Maui mortgage lender
Before you sign a contract with your builder, make sure you’re getting the best price when buying a new build by using these steps first. That way, you can sign knowing that you got the best deal possible.

1. Walk the lots

Your builder has created your dream development, but each and every lot is different. Your builder knows that some lots – like the end of a cul-de-sac, for example – are more desirable than others. As such, your builder might price the home there accordingly. You can negotiate a lower price by taking the time to walk through the available lots and choosing one that doesn’t have a premium price.

2. Pull comps

They say that comparison is the thief of joy, but when it comes to buying a new build, comparison might be your ticket to a better price. You can access public county files to see how much homes in the area are selling for or ask your builder for comparison homes and prices. That way, you can gauge where your home price should be and use it as a starting point for your own negotiations.

3. Price out upgrades

Your builder has a catalog of upgrades that you can choose from. You’ll get a base price for standard finishes, but each upgrade – think higher-end floors and finishes – will crank up your total price. Here’s the thing, though: Like beverages in restaurants, upgrades are mostly profit. Sure, the materials might cost a little more, but builders skim a hefty premium off of the top. Before you agree to your must-have upgrades, take the time to price them from a separate contractor.

4. Tour the model

If your dream house still seems a little out of reach for you financially, ask your builder about their model homes. Model homes are built on the most desirable lots with some of the highest-quality craftsmanship. At the same time, they’re often sold at deep discounts because they’ve been used as model homes and aren’t considered new or custom.

5. Change neighborhoods

Real estate is about supply and demand, and new builds aren’t any different. If you’re after an exclusive neighborhood with a low supply of homes, you’ll pay for it. If you, however, get into a new neighborhood or one that isn’t selling as quickly, you could save major money.

6. Shop around

Every builder has cultivated a network of preferred partners. From lenders to roofers to framers, most builders use the same contractors again and again – even if they don’t offer the best price. Don’t be afraid to shop around and check prices with other builders, contractors and lenders. In some cases, the incentive to use your builder’s preferred lender might be less valuable than a lower interest rate with someone else.

What Will Single-Family Homes Look Like in 10 Years?

Maui real estate trend
Porch took a look at census data from recent years. Using all those various data points, they were able to get a clear idea of what average single-family homes look like in 2016. By analyzing trends, they’re also able to predict what single-family homes will look like in 2036. Some notable trends emerged from their analysis, and here are some of the key takeaways.

Number of bedrooms

The number of rooms in a home is growing. Homes with two bedrooms or fewer are on the decline, while homes with five bedrooms are rising in popularity. While only 4.8 percent of homes had five or more bedrooms in 1999, that number has more than doubled to 10.8 percent today. Three- and four-bedroom homes prevail. Over 75 percent of homes have three or four bedrooms, and Porch predicts that number will remain consistent into 2036.
Maui real estate trend

Size of single-family homes and lots

In 1999, the average home was 2,198 square feet. Today, that average has climbed to 2,559, and Porch predicts that by 2036, homes will average 2,985 square feet. Lovers of open space, rejoice! Interestingly, though, we’re seeing the opposite trend in lot sizes. While lots used to come in at an average of over 36,000 square feet, they’ve shrunk to just shy of 31,000 square feet in 2016. Based on census data, Porch expects us to see further decline in lot size to just over 25,000 square feet in 2036.

Number of full bathrooms

Porch’s report revealed that the number of homes with just one bathroom is on a serious decline. Nearly 8 percent of homes had just one bathroom in 1999. Today, we’re down to 4.4 percent. Porch expects the trend to continue so that by 2036, less than 1 percent of homes will have just a single bathroom.

In fact, two-bathroom homes are also on the decline. While they dominated 72.6 percent of homes in 1999, they’re down to 58.7 percent today. Meanwhile, the number of three- and four-bath homes is growing. By 2036, Porch predicts that over half of homes will have three or more bathrooms.
Maui real estate trend

Amenities

Fewer and fewer homes contain fireplaces. Today, only 52 percent of homes have fireplaces in them. Based on past data, though, Porch predicts that number will be down to 31.5 percent by 2036. The tradeoff for fireplaces is other home perks. Patios and porches are on the rise, and Porch says that over 86 percent of homes will have a two- or three-car garage by 2036. They also predict that 100 percent of properties will have central air.

4 Easy Tips to Help You Downsize During a Move

Maui real estate
Regardless of your reasons for downsizing during your Maui move, the process does not have to be stressful. By keeping a few pieces of advice in mind, downsizing can go smoothly, giving you a new, uncluttered home.

Start as soon as possible

Perhaps the single most important piece of advice for downsizing during a move is to start early. As soon as you know you will be moving into a smaller space, get to work. Although going through an entire home or apartment can seem daunting, if you plan ahead, you can take care of a room each week or even one room a month. By tackling the space bit by bit, it will seem more manageable.

Sort, sort, sort

The best way to downsize during your move is to be honest with yourself about what you truly need. Before you begin going through the items in your house, sit down and make a list of what you will definitely need. These should be the items you use on a regular basis and the essentials, such as your bed and cookware.

Sell or donate items

Depending on your personal preference, you should sell or donate the items you decide you no longer need, provided they are in good condition. If you find yourself struggling emotionally to get rid of that unnecessary TV, the extra money you get from selling it might help convince you.

Consider a storage unit

Storage units are not for everyone, but if you have some items that you simply cannot get rid of but will not have space for in your new place, go ahead and rent one. Just make sure that you do not use a storage unit as an excuse to keep items you should not. After all, that just moves the problem instead of resolving it. It also forces you to rent a larger unit, costing more every month. Instead, use your storage unit for items you cannot bear to part with or might legitimately need in the future.

Is 2016 A Seller’s Market?

With fewer homes on the market to purchase, low interest rates keeping buyers intrigued, and home prices continuing to rise, experts say it is a seller’s market right now.

In its recent analysis, real estate marketplace Realtor.com finds homes are selling 7% faster than last year while home prices are breaking records. In April 2016, homes for sale spent a median 68 days between listing and contract, five days fewer than the same month in 2015. Six days faster than in March.
Maui real estate
Even though sellers are asking more for their homes, homes are selling at a faster pace. The median listing price in April was $245,000 – up 9% from last April and 2% higher than March. Inventory has slightly increased but is still down from a year ago.

The chief economist at Realtor.com says with housing demand up, strong employment rates across the country, and lower mortgage rates, we are in a strong and healthy real estate market – better than we’ve seen in a decade.

Realtor.com also reported that the top housing markets are seeing homes sell 17 to 45 days faster than the rest of the country. San Francisco, the nation’s most expensive housing market, leads the “hot” list. The median home there spends only 25 days on the market.

Here’s the “hot” list:

  1. San Francisco, CA
  2. Vallejo, CA
  3. Denver, CO
  4. Santa Cruz, CA
  5. Dallas, TX
  6. San Jose, CA
  7. Santa Rosa, CA
  8. Sacramento, CA
  9. San Diego, CA
  10. Stockton, CA
  11. Colorado Springs, CO
  12. Oxnard, CA
  13. Eureka, CA
  14. Modesto, CA
  15. Raleigh, NC
  16. Boston, MA
  17. Los Angeles, CA
  18. Boulder, CO
  19. San Luis Obispo, CA
  20. Lafayette, IN

If you’re ready to jump into the market in Maui, give me a call. We can get the process started today!

Sources: Consumer Affairs & Realtor.com (obtained May 2016)